As the 2024-25 end of financial year (EOFY) draws to a close, small business owners should take proactive steps to optimise their tax positions. With the deadline of 30 June fast approaching, now is the time to finalise records, confirm compliance and maximise deductions. Below are five essential areas to focus on:
1. Leverage the $20,000 instant asset write-off
The Australian Taxation Office (ATO) has extended the $20,000 instant asset write-off until 30 June 2025. Eligible small businesses can immediately deduct the full cost of depreciating assets costing under $20,000, provided the assets are first used or installed ready for use between 1 July 2024 and 30 June 2025. This applies on a per-asset basis, meaning multiple eligible purchases can each be written off in full.
With this in mind, businesses should consider bringing forward any planned purchases of qualifying assets to take advantage of the deduction before the end of the financial year.
2. Address ATO compliance focus areasAs the EOFY concludes, the ATO has highlighted specific compliance areas for small businesses to focus on:
● Income omission by contractors: The ATO is using data matching to detect underreporting.
● GST compliance: From 1 April 2025, around 3,500 small businesses with poor lodgement or payment histories will shift from quarterly to monthly GST reporting with the ATO.
● Incorrect claims of boost measures: The ATO has observed errors in claims for the skills and training boost and technology investment boost, including ineligible expenses and exceeding caps.
To stay compliant and avoid penalties, now is the time to review your records to ensure accurate income declaration, timely GST reporting and correct eligibility for any boost claims.
3. Understand changes to ATO interest charges
From 1 July 2025, interest on overdue ATO debts will no longer be tax-deductible – a significant shift that could increase the financial burden for businesses carrying unpaid tax liabilities. With the current General Interest Charge (GIC) sitting at 11.17% per annum, the cost of non-payment is already steep. Once deductibility is removed, the effective cost of tax debt will rise even further, directly impacting your bottom line.
To mitigate the impact, businesses should aim to settle any outstanding tax liabilities before 30 June 2025. Doing so not only avoids incurring non-deductible interest but also helps reduce unnecessary financial pressure heading into the new financial year.
4. Maximise deductions and review expenses
A final review of your expenses can uncover valuable deductions:
● Bad debts: If using accrual accounting, you can claim a deduction for bad debts written off before year-end, provided the debt was previously included in income.
● Obsolete stock: You may be entitled to a deduction if your stock has declined in value or become obsolete during the year.
To make the most of these opportunities, it's important to work closely with your accountant to identify and process all eligible deductions, including writing off bad debts and reviewing stock valuations before the financial year closes.
5. Prepare for superannuation obligations
Employers must ensure employee superannuation contributions are current and compliant:
● Superannuation guarantee (SG) rate: The super guarantee (SG) rate will rise to 12% from 1 July 2025. Apply the new rate to all salary and wages paid on or after this date.
● Payment deadlines: To avoid the Super Guarantee Charge (SGC), contributions must reach the employee’s fund by the due date. For the 30 June quarter, that’s 28 July.
● Tax deductibility: Super contributions are only deductible in the year they are received by the super fund. Delays may result in a lost deduction.
To stay on track, ensure all super contributions are processed and received by 30 June to secure this year’s deduction. Confirm contribution timing and fund details with your accountant to avoid unnecessary complications.
Proactive tax planning is key to reducing liabilities and ensuring compliance before EOFY. By acting early on deductions, superannuation and ATO focus areas, small businesses can enter the new financial year with confidence.